The Maharashtra Government has reduced the value-added tax (VAT) on aviation turbine fuel (ATF) from 18% to 7%, effective from May 15 until November 14, 2026. This move is expected to ease the financial burden on airlines facing increased operational costs and higher fuel prices. The 11-percentage-point reduction in VAT on jet fuel is anticipated to decrease fuel expenses for airlines operating within the state.
Fuel costs represent a significant portion of Indian airlines’ total expenditure, accounting for approximately 35-40% of their overall costs. The tax reduction comes as a relief to carriers grappling with elevated aviation fuel prices, extended flying routes, and airspace constraints related to geopolitical tensions in the Middle East. Discussions between the Ministry of Civil Aviation and various state governments led to this decision to lower VAT on aviation fuel.
Media reports had previously highlighted meetings between the ministry and states like Delhi, Tamil Nadu, West Bengal, and Maharashtra to address concerns over ATF taxes amidst disruptions caused by the conflict in West Asia. Among Indian states, Tamil Nadu imposes one of the highest VAT rates on ATF at 29%, while Delhi levies 25%. Prior to this revision, Maharashtra had an 18% VAT on aviation fuel.
Ram Mohan Naidu Kinjarapu emphasized the challenges faced by the aviation sector, including airspace closures, operational uncertainties, and surges in ATF prices due to the Middle East crisis. He acknowledged that VAT on ATF, imposed by state governments, is a significant expense for the aviation industry. The minister expressed gratitude to the Maharashtra government and Devendra Fadnavis for swiftly reducing VAT on ATF from 18% to 7%.
